What Is an Invoice And Why Is It Important

What Is an Invoice And Why Is It Important?

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What Is an Invoice?

A valid invoice is a commercial proof of purchase which lays out and records a transaction between a buyer and a seller at the time of purchase. In case some goods or services were purchased on credit, the invoice in most cases specifying them and providing information on the available payment methods.

Invoices are of many kinds and they may be a paper receipt, a bill of sale, a debit note, a sales invoice, or an online electronic record.

A notice of invoicing should clearly indicate its purpose as a billing document. The ones which are commonly seen are mostly made up of a unique identifier called the invoice number, which can be used both internally and externally as a convenient reference point. Moreover, it often includes the contact information of the buyer or the seller allowing the buyer to communicate with the seller in case of any billing issues.

Invoice Terms

The invoice may encompass aspects of payment terms, for example, discounts for early payments, incentives for cross-payment, or penalties for late payments. Secondly, it helps to get information on the unit cost of different items purchased, the total quantity purchased, and any other charges like freight, handling, shipping, taxes and sums up the total amount due.

Invoice Timing and Printing

Enterprises may choose to send a month-end statement as the invoice which includes all outstanding transactions. In these situations, an important statement to make is that no further invoices will be raised. Traditionally, invoices have been written on paper and usually more than one copy is made so that both, the buyer and the seller, have a record of the transaction.

Nowadays, computerised invoices are very popular. They can be printed off as required or emailed to each participant. Electronic records also simplify your search and sorting of transactions by number, date, goods, or client.

Pro Forma Invoice

Pro forma invoice is a pre-invoice that is sent to buyers before the shipment or delivery of goods. Usually, the invoice will include the relevant information about the items purchased and others, like the shipping weight and transportation charges. Pro forma invoices are usually used in international trade, particularly for customs clearance of imports.

Invoice Date

The invoice date is the time and date when the goods have been billed. The transaction has been recorded, officially. Hence, the invoice date is one of the most important features of the bill, since it includes the credit period and due date. This is particularly relevant for those that provide credit, such as the net 30, which means that payment is due in 30 days.

And many businesses that give their customers the opportunity of returning products usually indicate on their invoices the deadline which would be based on a specific time frame of days from the evidence of purchase.


Today, as we are living in the digital age, everyone, including businesses and organizations, find electronic invoicing to be more convenient and effective than traditional paper-based methods. Electronic invoicing, generally known as e-invoicing, involves electronically generating, storing, and maintaining these documents, as well as making sure that they are in line with the terms and conditions of the contract.

These electronic documents may involve invoices and receipts, purchase orders, credit and debit notes, term of payment and instructions regarding payment, as well as remittance advices. Electronic invoices most often are sent by email, a web page, or an app. The advantages of e-invoicing include the following:

  • Longevity and resilience against physical harm
  • Efficiency in searching and organizing for specific names, terms, or dates
  • Enhanced audit capabilities
  • On-demand printing or reproduction abilities
  • Capacity for data aggregation and business insights
  • Decreased reliance on paper consumption

E-invoicing is a term that includes different technologies and mechanisms which are used to display invoices electronically for customers to pay them. It is a generic form for all the e-invoicing procedures. EDIFACT and UBL, which are the e-invoicing standards developed worldwide, aim to expand adoption and efficiency.

Accounts Payable and Invoices

Invoices will be generated after every sales transaction and used to track product sales for inventory control, accounting, and tax purposes, which help in the monitoring of accounts payable and other obligations. Plenty of firms are in the practice of shipping the product and receiving the payment later, which means that the total amount due comes as an account payable of the buyer and an account receivable of the seller.

An invoice, in a current business world, is usually sent electronically instead of on paper. If an invoice is lost, the buyer can ask the seller for a duplicate copy of the invoice. The issuance of the invoice signals the extension of credit, implying that the seller has delivered the product or service and there is no immediate payment for the cash.

Invoices and Internal Controls

Invoices play the fundamental role within the internal control of accounting. When it comes to listing charges on an invoice, the approval is needed from a management team which encompasses the relevant personnel. Moreover, matching invoices with their corresponding purchase orders is done, and approved transactions are processed at the end of reconciliation. As auditing firms conduct inventory tests on invoices, the documentation is recorded accurately within each accounting period during the expenses cutoff tests.

Is an Invoice a Bill or Receipt?

The bill, commonly known as an invoice, is meant to provide a detailed account of either products or services rendered to a specific customer. Receipt is the document that shows that there was paid.

Does an Invoice Mean You’ve Been Paid?

An invoice is commonly used to inform the buyer that the payment is due.

What is an invoice, and what is it for?

It not only helps in informing client of their dues to pay but it could also be used as a record for accounting purposes.


The invoice is a document that is used to notify a buyer that payment is due. Besides that, it acts as a record for the issuing business to also track its receivables. Earlier invoices were printed on paper only being the only option due to technological constraints. In the recent times, electronic invoices has gained acceptance among business people as they save time and money. Also, the invoices can be generated and sent automatically.

How Can FastLane Help You?

FastLane Group provides accounting solutions that are one-stop for businesses in Hong Kong. We feature a talented team of professionals who come with years of experience that makes your accounting operations easy to handle so that you can concentrate on growing your business. Get the financial analysis in real-time, automate, and do the tax compliance, all in one place. 

Contact us today to have a conversation!